With the stock market reaching its highest levels since 2007, hiring is showing signs of picking up again on Wall Street—and raising hopes the industry's long post-crash funk is at last coming to an end.

In the past week, small banks and brokerages such as Guggenheim Securities and Oppenheimer & Co. have announced significant new hirings, while investment banking boutique Cowen Group unveiled a merger that will increase its head count by 16%.

"The industry's restructuring is by no means over, but most of it is done," said Richard Lipstein, a managing director at recruiter Gilbert Tweed International. "As it becomes more clear what regulators will or won't allow the banks to do, bankers are starting to prepare for new opportunities."

That said, the hiring by small banks and brokerages isn't expected to be nearly enough to offset the continuing stream of job losses at big banks. That's why the Independent Budget Office expects the ranks of the city's best-paid workforce to decline yet again this year, by about 4,000 people, to 167,000. Before the crash, 190,000 New Yorkers worked in the securities industry.

"The plain simple fact is that Wall Street's revenues are half as much as five years ago, and we don't see them returning to anything like what they were," said IBO Director Ronnie Lowenstein.

Swinging the ax

In addition to forecasting sluggish revenue, the IBO expects securities industry profits to decline by another 35% this year, as new federal regulations kick in. Ms. Lowenstein added that most of the industry's profits in recent years are attributable to the Federal Reserve's ultra-low interest rates, which sharply reduced the operating costs of banks. But when rates start to rise, profits could come under heavy pressure.

The uncertain-at-best outlook helps explain why giant banks like Barclays and Citigroup continue to shed staff. Barclays last week filed documents with state regulators saying it would lay off 275 investment-banking employees, effective May 15, from three midtown locations, including its U.S. headquarters on Seventh Avenue. Citigroup in December said it would let go 11,000 employees, including 1,700 in New York, and analysts foresee further restructuring.

Morgan Stanley may be swinging the ax widest. Last month, it said it would sack 1,700 people this year after letting go 4,500 last year. Further job cuts seem inevitable, since the bank told investors it would cut overhead by $1.6 billion over the next two years.

"We've been operating so much under the basis that there won't be increased revenues," Chief Executive James Gorman told investors last month.

The most vulnerable to layoffs are bond and stock traders, both of which have seen business dry up as looming regulations like the Volcker Rule limit how much banks can gamble with their own capital.

"There is a 'Great Repricing' occurring," said analyst Brad Hintz of Sanford C. Bernstein & Co. "Traders and sales staff are being replaced by machines or cheaper staff."

In another sign of the tough times, staffing firm Robert Half International last week reported that only 5% of financial chiefs said it was "very challenging" to find qualified employees, down from 11% a year ago.

The good news is that the pace of layoffs is expected to exhaust itself this year. The IBO expects head count will begin to recover in 2014 and slowly rise to about 177,000 in 2017, which would be the same amount employed by the Street in the middle of the last decade as it emerged from the Nasdaq bust.

Courting rainmakers

35%

PROJECTED decline in securities industry profits this year, according to the IBO

Still, even the ever-shrinking big banks are hiring in certain areas, particularly in those where regulators don't require they set aside cash to guard against potential losses. That means nearly all of them are aggressively courting top stockbrokers and private bankers who can bring wealthy clients with them. Last week, Citi hired a senior private banker from JPMorgan Chase to lead a push into Florida, for example.

"If you can bring in a business with a proven revenue stream, you are extremely valuable in this market," recruiter Mr. Lipstein said.

Still, he and other pros say most hiring activity is going on at boutique firms.

For example, in an apparent attempt to take advantage of the disruption anticipated when Obamacare takes full effect next year, Guggenheim Securities announced last week that it had hired a managing director from Deutsche Bank who specializes in trading health care stocks to supplement the team of health care bankers and advisers brought in last summer.

Oppenheimer brought in a refugee from French banking giant BNP Paribas to serve as co-head of emerging-market bond sales.

And Cowen Group, which specializes in serving health care companies, agreed to acquire Dahlman Rose, whose focus is energy and natural resources, for an undisclosed sum. The good news is 600-employee Cowen will expand into some additional lines of business and bring in teams of new analysts, bankers and traders.

Tempering the good news is this sobering fact: Even if Cowen brings in everyone from Dahlman Rose—which it probably won't—that would mean hiring only about 100 people.

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